Disney scrubs animation unit set up to make Pixar sequels

Acquisition of Pixar makes the division unnecessary

32 employees are laid off.

The Walt Disney Co. has shuttered its computer animation unit set up to make sequels to such Pixar Animation Studios' hits as Toy Story and Finding Nemo.

The closure, which came Monday, is the first casualty of Disney's $7.4 billion acquisition of Pixar.

Thirty-two employees, or nearly 20 percent of the 168 artists, production managers and support staff, were told they would lose their jobs effective May 26.

The remaining 136 will be absorbed into Disney's feature animation division and redeployed to work on such productions as Meet the Robinsons, Rapunzel and American Dog.

In a statement, Disney confirmed Monday's developments with the Los Angeles Times and said it would help laid-off employees find new work. At least half a dozen or more hired to work on Toy Story 3 were foreigners working in the U.S. on visas.

Workers should find themselves in demand, with computer animation enjoying a boom. Studios such as DreamWorks Animation SKG Inc., 20th Century Fox and Sony Pictures are poised to release a slew of digitally animated movies this year.

Dubbed "Circle 7" after the street in Glendale, Calif., where the unit sits, the sequels operation was quietly set up last year by former Disney Chief Executive Officer Michael Eisner at a time when Disney's lucrative partnership with Pixar was strained and in danger of dissolving. Rivals derided the attempt to replicate Pixar's unique creativity, nicknaming the operation "Pixaren't."

Disney had the right to make Pixar sequels under its previous distribution agreement. But its decision to move ahead irked Pixar executives, who worried that a botched effort would hurt their company's reputation.

All of that changed in January, when Disney agreed to buy Pixar. Disney Chief Executive Officer Robert Iger and Pixar Chairman Steve Jobs pledged that any Pixar sequels would be produced at Pixar's Emeryville, Calif., headquarters using artists who worked on the originals.

In addition, Disney's core animation operation will now be run by Pixar creative director John Lasseter -- who directed Toy Story and whose next film, Cars, is due out this summer -- and Pixar President Ed Catmull.

Disney would not comment about the future status of Circle 7 chief Andrew Millstein, who announced the layoffs to his staff at a noon meeting.

But it is thought that he will look for another job within Disney. Millstein, who once ran Disney's now-defunct animation studio at Walt Disney World, has worked at Disney for nine years.

Also unclear is what will become of the multimillion-dollar computer animation facility in Glendale, although it is likely the company would use it for future productions.